EMCC European Monitoring Centre on Change

Temporary reduction of activity

Romania
Phase: Anticipation
Type:
  • response to COVID-19
  • Income support for workers
  • Working time flexibility
Dernière modification: 30 November, 2020
Nom natif:

Reducerea temporară a activității

Nom anglais:

Temporary reduction of activity

Coverage/Eligibility

The instrument can be used in cases of temporary business slowdown for economic, technological, structural or other similar reasons. It can be used by any type of enterprise, no subjects are excluded.

COVID-19 response

The governmental wage indemnity for suspended or reduced activity (hereafter, the indemnity) is eligible for companies suffering from at least 25% reduced turnover due to the COVID-19 crisis. For the indemnity to be paid, the employer must submit and affidavit concerning the registered decrease of indebtedness for the previous month. The decrease has to amount a minimum of 25% compared to the average of indebtedness registered in January to February 2020, and the company must not have the financial capacity to pay all the employees. 

Main characteristics

In cases of temporary business slowdown for economic, technological, structural or other similar reasons, the employer has three possibilities of internal flexibility available to use:

  1. After consultation with the trade unions or worker representatives, the employer may reduce working time from five to four days per week, in case of business slowdown over periods exceeding 30 working days. This may come with a corresponding reduction of salary, until the reasons that caused the reduction of working time are consumed. Thus, workers will be paid less than before, proportionally to the reduction in working time. Depending on the circumstances of the reduction in activity, the working time can be reduced for all workers, or only for some categories (for instance, workers in a specific department).
  2. During business slowdown and/or temporary interruption of operations, employers may suspend the employment contract of workers. In this case, the affected employees must receive a compensation (an allowance for technical unemployment), paid by the employer, that should not be less than 75% of their usual salaries. During this period, the employees must remain available for the employer, should the employer decide to resume the activity at any time. All social contributions have to be paid, except contributions to the unemployment insurance system. These latter contributions are not due because the employment is suspended during the period in which the employees receive the allowance for technical unemployment.
  3. During periods of reduced activity, the employer has the possibility to grant paid holidays to compensate for the extra work to be done in the following 12 months. Normally, time off is granted after workers have provided overtime. This instrument enables the opposite: first, in periods of business slowdown, workers receive time off; and they perform extra work only after. It is used especially in shops and other economic entities with a large workload during holidays (for example, in shopping malls and supermarkets where, because of the large number of customers, employees are required to work more hours during holidays). The employees receive time off during less busy periods, and afterwards they work more hours in times of higher activity.

COVID-19 response

For the period of the state of emergency (between 16 March to 15 May 2020), and in some cases detailed below, until 31 December 2020, the workers' indemnity (amounting to at least 75% of their base salary during suspension of employment or reduction of activity due to the crisis) is covered by the unemployment insurance budget up to a maximum of RON 5,429 (€1,100) per month. Employers can, but are not legally obliged to, cover the difference if the indemnity is capped to provide the worker with the 75% of their base salary. In order to receive the indemnity, employers have to submit a payment request to the local unemployment agency. The indemnity is subject to tax and social security contributions. The employer is responsible for the calculations, forfeiture and payment of the income tax, the social security contributions and health insurance contributions from the benefits received from the unemployment insurance budget.

Furthermore, a law for 'paid leave when schools are closed under exceptional circumstances' has been approved by the government (Law no. 19/2020). The law aims to allow at least one parent to stay at home with children while the schools are closed. The law states that:

  • Paid leave is granted only if the tasks associated with the employees’ roles cannot be performed in 'working from home or teleworking conditions'.

  • Paid leave can be granted to only one of the parents, and only if the child in care is of maximum 12 years of age (or 18 years of age for children with a disability) and is formally registered as attending courses of a school.

  • In some sectors, the parent's request for leave is conditioned by the employer's acceptance (national energy system units, operating units in the nuclear sectors, continuous fire units, health and social care units, telecommunications, public radio and television, rail transport, units that ensure the public transport and sanitation of localities, as well as the gas, electricity, heat, and water supply of the population).

  • During such leave, employees are entitled to a payment of up to 75% of the employee’s base salary, but not more than 75% of the average gross salary in the economy. The allowance is subject to personal income tax and social security contributions (that is personal income tax, social security contribution, health insurance contribution and work insurance contribution). The net value of the allowance paid by the employer (the amount actually received by the parent) can be recovered from the Guarantee Fund for the payment of salary claims; the corresponding personal income tax and the social security contributions are borne by the employer. To recover the net allowance, employers must submit a request to the local unemployment agency. This applies to all employees with children in their care.

On 29 May 2020, the Government Emergency Order no. 90/2020 was published in Official Gazette no. 459/29 .05 .2020, to establish active support measures for employees and employers in context of the epidemiological situation caused by the spread of SARS-CoV-2 coronavirus. The Order also amends the Government Order no. 6/2019 on the establishment of tax facilities:

  • The settlement of part of the salary of each employee who has been temporarily unemployed will be borne by the unemployment insurance budget, up to the budget approved. It will be 41.5% of the gross basic salary corresponding to the place of employment, but will not exceed 41.5% of gross average wage gains used for the basis of the State social insurance budget for 2020 (i.e. RON 5,429 lei, approx. €1,131).
  • A part of the specific conditions for the settlement are: employees must have had their employment contracts suspended on the employer's initiative on a  minimum period of 15 days during the emergency/alert period; employment relations must be maintained by employers until 31 December 2020, except for seasonal workers or where the employment contract terminates on grounds not attributable to the employer; employers with multiple economic activities, one of which falls within the areas with restrictions established by the authorities must opt either for this facility (41.5% settlement of the salary under the terms of the Government Emergency Order no. 90/2020) or for the continuation of the grant of technical unemployment until the date the restrictions are removed of by the authorities.

Funding

  • National funds
  • Employees
  • Employer

Involved actors

National government
Legal framework; funding
Employer or employee organisations
Prior consultation with the relevant trade union or employee representatives needs to take place. However, in case of failure to reach an agreement on this subject, triggering a collective conflict is not possible, and no strike can legally take place on that basis.

Effectiveness

Since its entry into force in 2011, this tool has been used in many cases (see 'Examples') - both by private companies and public institutions - as a way of avoiding redundancies.

5,800 companies applied for a total of about 70,000 employees on the first day employers could submit a request for receiving the indemnity during the COVID-19 crisis. The government declared that about 1 million employees could be supported with a total of RON 4 million  (€833,333). By May 2020, 1,118,865 employees received indemnity for technical unemployment and the total amount paid by the state was RON 1.38 billion (€290 million).  A total number of 129,149 employers were registered with valid applications by the National Employment Agency. 

There is no estimation yet regarding the number of parents/employers that made use of the legal provision for 'paid leave when schools are closed under exceptional circumstances'.  Nearly RON 8.6 million (€1.7million) were also paid through the State Agency for Payments and Social Inspection for 4,044 beneficiaries who were extended the parental allowance and RON 12.5 million (€2.6 million) for 29,266 beneficiaries who had their disability certificates extended.

 

Strengths

These measures allow the employers to overcome periods of reduced activity, to maintain employment contracts and to avoid lay-offs and redundancies.

Weaknesses

Employees will temporarily have lower incomes than their usual salaries.

Exemples

Many Romanian companies have opted to use this tool of internal flexibility: ArcelorMittal Roman: http://newsallert.ro/2511-2 Minprest Serv Rovinari: http://www.gorjeanul.ro/actualitate/minprest-a-cerut-sindicatelor-aprobarea-a-patru-zile-de-munca-pe-saptamana http://www.pandurul.ro/articol/minerii-si-energeticienii-trimisi-prin-rotatie-in-_66590.html Azomures: http://www.zi-de-zi.ro/2014/04/04/anunt-soc-3-500-de-angajati-azomures-trimisi-in-somaj-tehnic Ford Craiova: http://www.dcnews.ro/salaria-ii-ford-de-la-craiova-trimi-i-in-omaj-tehnic_502336.html Romanian Television: https://economie.hotnews.ro/stiri-media_publicitate-20339923-conducerea-tvr-revocat-decizia-privind-reducerea-timpului-lucru-salariilor-angajatilor.htm Energy Complex Oltenia: https://www.ceoltenia.ro/program-de-lucru-pentru-luna-iunie/ Energy complex Hunedoara: https://gddhd.ro/actualitate/ceh-pentru-unii-dintre-angajati-saptamana-de-lucru-va-avea-patru-zile/
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